The proposed takeover of Leeds United by the Cagliari owner Massimo Cellino could collapse this month if Cellino is found guilty in a Sardinian court of failing to pay tax which prosecutors allege was due on a yacht he took to Italy from the US. Cellino, who has a 2001 conviction for false accounting and is under investigation for alleged misuse of public funds relating to work on Cagliari's Quartu Sant'Elena stadium, is accused of illegally evading paying €400,000 import duty on the yacht, which was seized in Cagliari in 2010.

At a court hearing in Cagliari last week, the Sardinian public prosecutor, Andrea Massidda, argued for a €1.165m fine to be imposed on Cellino, and for the yacht to be confiscated.

The case is due to be heard on Tuesday 18 March, five days after the Football League board is due to meet to consider Cellino's Leeds takeover.

It is now assumed the League will await the outcome of the tax evasion case against Cellino before making any decision. If Cellino is convicted, it is almost certain he will be barred from completing his purchase of a 75% stake in Leeds, which has been agreed, subject to Football League approval, with the club's current owners, Gulf Finance House, an investment bank in Bahrain.

The League's rules on having "fit and proper persons" in charge of its clubs prohibit people with unspent convictions for dishonesty offences from being directors, 30% owners or from exercising control over one of its clubs.

Cellino, according to sources close to the deal, is understood to be proposing to have a 10% stake in the company, Eleonora Sports, being used to buy Leeds, and the money to be coming via a family trust, of which the League has been seeking more detail in recent weeks. Cellino has not suggested in his public statements that his involvement will fall short of being in control, as evidenced by his UK lawyer's purported sacking of the manager, Brian McDermott, before Cellino had even exchanged contracts with GFH. McDermott was subsequently reinstated.

Cellino, however the deal is structured, is considered certain to be subject to the League's rules, and the League has been seeking details, including Italian translations of original documentation, of Cellino's past record.

Cellino's lawyer in Sardinia, Giovanni Cocco, told the Guardian that Cellino is intending to plead not guilty to the tax evasion charge in court on 18 March. Cocco explained Cellino's defence is that the yacht was owned by a US company and that Cellino was not bound to pay tax on it. According to Sardinian media reports of last week's court proceedings, the prosecution alleges that the US company was formed only a month before Cellino took the yacht to Italy and was a device to evade tax.

"The accusation is completely unfounded," Cocco said. "It is a vessel flying the flag of the United States owned by a US company, which did not have to pay tax in Italy according to European and international law."

Cocco added that while the alleged offence is "formally criminal", it is "an administrative matter" and confirmed that the public prosecutor has asked for a fine to be imposed.

Cellino, an agriculture magnate, was previously convicted of fraud in 1996, which Cocco says has been expunged following appeals. In 2001, Cellino was given a suspended 15-month prison sentence for false accounting at Cagliari, the football club he has owned for 22 years. Both of those convictions are thought certain to be considered "spent" according to English law, as they are more than 10 years old, so not caught by the League's rules. Cellino is also under investigation for the alleged misuse of public funds for works at Cagliari's stadium, for which he was held on remand for 16 days last year. Cocco has dismissed the investigation as "completely irrelevant" and said Cellino "rejects any involvement in unlawful acts". Cocco added: "He will firmly defend himself from accusations, if and when those accusations will be formalised."

GFH, which bought Leeds from Ken Bates in 2012, agreed last month to sell a 75% stake to Cellino, after deciding it no longer wants to fund the club's approximately £1m per month losses. The League, which is examining all aspects of the proposed takeover, is understood to have asked GFH how it can sell 75% when it reported last June that it had sold "a majority stake" in Leeds. GFH is understood to have told the League it did sell a majority stake to Salah Nooruddin, the club's Bahrain-based chairman, then bought it back to consolidate the holding so it could negotiate a 75% sale. The League is understood to have asked for further details of these transactions.